Author: Stephen Pickering

In Response to this blog post “Why Coke Cost a Nickel for 70 Years” I wrote this comment:

“Same reason the price of oil was basically the same from 1920-1970, even through the invention of automobiles and Jet Airplanes! It’s because Nixon closed the London Gold window in 1971. That’s the whole and only reason for inflation, lack of a Standard unit of Account. We don’t need a Gold Standard because then there wouldn’t be enough liquidity, but we do need a Gold barometer to tell the Fed how much liquidity the economy needs at any one moment in time.”

What this means is that the Fed should target the price of Gold as far as adding or subtracting liquidity into the economy as whole. Gold is the most Stable Unit of Account for a whole host of Reasons, too numerous to write down here.

So how does one target Gold? Once the target has been decided, let’s say for the sake of argument $1000 per ounce. Then, if the price of Gold moves above that target, that means that there is too much liquidity awash in the market. So at that point the Fed would sell bonds to sop it up. Same thing in reverse: If the price of Gold goes below the target, that means the economy doesn’t have enough liquidity, and at that point, the Fed would purchase bonds or T-bills, to add liquidity, i.e., add fuel to a growing economy.

So an economy can grow without any inflation. In fact, growth creates more efficiencies and innovation, which cause the prices of all things to come down, in “real” terms, without any inflation or deflation, needing to come into the picture.

It’s as simple as that.

There were three causes, and all were the government driven:

1. The Congress – The Community Re-investment Act. This is what gets me: Everyone thinks it was lack of regulation that caused it. The regulation in the form of this act forced them to lend to everyone and everybody! I mean how much more ironic can it get than that? Do you think bankers in a free market are going to lend their money to people who don’t have the means to service the debt? The regulation caused the meltdown, not the lack thereof.
2. Freddie Mac – This is a government entity. It’s billed as a “quasi” half government/half privatized enterprise. But it’s all government. Created by congress to buy the loans and package them as securities that could be sold to other Financial institutions. Now why in the World would anyone want to do that? Supposedly to create more liquidity in the mortgage market, in order to do the very thing that everyone rails against now: Encourage more people to buy more homes! So banks could sell them their loans taking the risk of loaning off the table, and Financial institutions were willing to buy them because they knew that they were backed by the Federal Government. Freddie had a seemingly endless supply of liquidity to make good on its losses, until the hole became to big to cover up, so big that it even made a dent on the Government’s ability. Then someone had to be found to blame.
3. The Federal Reserve – The creator of money itself. When a private company is creating the money for the Government, but not doing anything of value for that money, then lending it out at interest, thus making a profit from the whole economy by not doing anything, how do you think that is going to turn out?

So the Federal Reserve is the drug grower, Freddie was the dealer, and Congress was the Police, who not only didn’t stop it, not only turned a blind eye to it, but encouraged it to go on! Okay, well you got me on the last one: The Federal Reserve is a private agency, but it’s existence and it’s operations are all under the protection of the Government.

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This poppycot editorial by the nitwit David Brooks in the NYtimes today, “The Party of Work,”  got me all stirred up to write this. I was going to write a comment, but guess what? Comments were closed! Ha! Oh, I wonder why?

Oh, and Asians, broke 3-1 against Romney because of his stupid demonizing of China, threatening trade sanctions, etc.

As much as I was dissappointed by the elections, the reality is, Romney was clueless. At best he was clueless, at worst he was another puppet of the Neo Cons, and not only would have started trade wars with Asia, but actual wars with Iran, Syria, you name it. Sure he would have been a Capitalist at home, but Romney was the “Forbes” candidate. You ever read Forbes? They’re great on economic policy, but man, their Foreign Policy is horrifying.

Plus, Obama won’t be able to get any more of his socialist programs through with this Republican House. And after two more years of this misery, the Senate will flip. Then two years after that, the Presidency, unless the Republicans continue to nominate people who are Neo Con puppets.

I know what you are saying: But Obamacare will now come into effect! Yeah, and that’s bad, but here’s the deal, and I think it’s very enlightening to see, in part, why Romney lost: During the Primaries, Romney was vehement about repealing it. During the actual Presidential debates, he said, he wanted to, but didn’t know if he could now! Now, who’s going to go out and vote for a guy like that? Exactly.

Bob Beckel, on O’Reilly the other night said it best: “People don’t go out to vote against someone. The go out to vote FOR someone.” Romney was an empty suit, that no one was energized to vote FOR.